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Chile Reconstruction 27F Balance Sheet Executive Summary

Studies Division Ministry General Secretariat of the Presidency of Chile February 7, 2011


Reconstruction Balance Sheet

A. Scale of the Catastrophe 1. Total Figures

Date: Saturday, February 27, 2010.

The fifth most intense earthquake ever recorded

Magnitude: Earthquake measuring 8.8 on the Richter scale, followed by a series of tsunamis. Area affected: From the Valparaíso Region to the Araucanía Region, covering more than 630 kilometers of Chilean territory. Population affected: 12,800,000 people, or 75% of the Chilean population. Cities affected: 5 cities with over 100,000 inhabitants, 45 cities with a population of over 5,000 and over 900 towns and rural and coastal communities. Fatal victims and missing people: 524 dead and 31 missing.

The earthquake of February 27 is one of the five greatest earthquakes ever recorded. The other four were in Valdivia, Chile (1960; 9.5° Richter), Alaska (1964; 9.2° Richter), Sumatra (2004; 9.0° Richter) and Kamchatka, Russia (1952; 9.0° Richter).

2. Scale of the Catastrophe by Sector

Residential: 220,000 homes were seriously damaged or destroyed. Education: 3,700 schools were damaged (1 out of every 3 schools in the affected area), which prevented 1,250,000 students from starting the school year on March 11. Health: 17 hospitals were rendered unusable, 22 had medium to significant damage and another 34 had some level of minor damage (75% of Chile’s hospital network was affected). Out of the 19,000 hospital beds in the affected areas, 4,249 were destroyed. Public Infrastructure: The damage to public infrastructure included 1,554 kilometers of damaged roads, 212 bridges destroyed or damaged, 9 airports and aerodromes damaged, 28 fishing wharfs completely ruined, 748 rural drinking water systems damaged, 41 reservoirs, problems with rainwater collectors and irrigation canals, and 53 ports with some level of damage. Armed Forces: The tsunami completely destroyed the naval base and installations of ASMAR in Talcahuano, as well as the majority of the Port Captains’ and Harbormasters’ offices in the areas affected.

Public Infrastructure

Over 1,700 areas of damage in the public infrastructure (roads, bridges, ports and irrigation works, potable water networks etc.).

The army also suffered significant damage, such as to the Escuela de Sub-Oficiales (Non-Commissioned Officers’ School) and the Military History Museum in the Metropolitan Region, as well as to the facilities of

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Reconstruction Balance Sheet the 19th "Colchagua" Regiment in the O'Higgins region, and elsewhere. With regard to the Carabineros (Chile’s uniformed police) and the PDI (Chilean detective service), most of the police precincts in the areas affected were damaged, with losses valued at US$ 165 million. Law: The catastrophe left 10 penal establishments inoperable, as well as 2 low security night detention centers, 30 registry offices and 2 medical law service offices. In addition, 437 other offices and properties were also damaged. Cultural Heritage: The earthquake caused enormous damage to national monuments and places of historical or cultural value across central Chile. Among the main areas affected were the National Natural History Museum in Rancagua and access to the historical coal mine at Lota. Many churches and historic buildings were also badly damaged, including the churches of Santa Rosa de PelequÊn, the Cathedral of Linares, the typical area of Lolol, the Municipal Theater of Cauquenes, the historical center of Cobquecura, the home of Violeta Parra in San Carlos and many more.

3. Total Cost of the Catastrophe

The Treasury Ministry has estimated that the total losses amounted to US$30 billion, equal to 18% of GDP.

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Reconstruction Balance Sheet

B. Reconstruction Plan This plan was developed and has been executed in three stages: 1. The Immediate Emergency (from March 11 to 31, 2010)

There were two key objectives during this stage. The first was to support families during the painful process of burying their loved ones, provide help to those who had been injured and search for the people who were still missing. The second was to re-establish public order and guarantee the supply of basic services such as drinking water, electricity and food, as well as to restore road connectivity and the communications systems. 2. The Winter Emergency (from March 11 to July 11, 2010)

During this phase, measures were taken so that the 1,250,000 students who were unable to begin the school year on March 11 could start classes within 45 days. Another priority was to ensure access to healthcare, which was achieved within 60 days by setting up field hospitals and taking other emergency measures. It was also important to provide shelter for those who had lost their homes. Within a period of 120 days, 80,000 emergency homes were provided and 106 villages were built to house 4,000 families. Through the “Manos a la Obra” (Let’s get to work) program, resources and materials were also given to 50,000 families so they could repair their homes. Furthermore, the repair of roads and bridges and removal of debris from the streets created jobs in reconstruction for 60,000 people. 3. Reconstruction (from March 11, 2010 to March 11, 2014)

This phase of the Plan is now in full swing and is being carried out alongside the Government’s Program. The objective is that by March 11, 2014, the buildings and facilities destroyed by the earthquake will have been rebuilt. In setting this goal, the optimum use of public resources and the need to maintain a healthy fiscal policy were taken into account. Following is a description of the key progress to date and the items which are still pending, by sector: Residential

Progress made: o As at February 27, 2011, a total of 135,000 subsidies will have been paid out (61% of the total number to be awarded). o 74,000 works are under way or have already been completed. o Of the 100 Reconstruction Master Plans, 47 are considered completed, with defined, agreed investment portfolios. Pending: o During 2011, the remainder of the 220,000 promised housing subsidies will be paid out. o By the end of 2011, 90% of the reconstruction work and home repairs will be complete. o The Reconstruction Master Plans will be completed and implemented. Education:

Progress made: o The rebuilding and repairs of 70% of the buildings affected by the earthquake have been supported through the following programs:

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Reconstruction Balance Sheet 

Programa Sismo 1 (Earthquake Program 1) and Sismo 2 (Earthquake Program 2) (594 schools and colleges).  Plan de Reparaciones Menores 1 (Minor Repairs Plan 1) (CH$80 billion, 601 establishments, ends in February).  Plan de Reparaciones Menores 2 (Minor Repairs Plan 2) (CH$60 billion, 333 establishments, ends in April).  Repairs Plan for 12 traditional schools. Pending: o Among the main plans for recovering the educational infrastructure are the following:  Plan de Reparaciones Mayores (Major Repairs Plan) (First term of 2011, for schools and colleges with damage worth over CH$170 million).  Plan de Reposiciones Totales (Total Replacement Plan) (First term of 2011, for schools and colleges which were more than 50% destroyed).  Plan de Establecimientos Emblemáticos (Plan for Flagship Establishments) (21 schools and colleges, CH$35 billion). o Ch$8.5 billion has been made available for rebuilding or repairing the university infrastructure. o The Education Ministry also aims to reduce by half the 70,000 students who are still sharing facilities, by March 2011. Health:

Progress made: o The number of hospital beds has been restored to 100%, using temporary or permanent solutions. o 90% of the medical and industrial equipment is operative. o 84% of the operating theaters which were destroyed are now functioning. o 19 field hospitals were set up to deal with the emergency (14 have now been dismantled). o Of the 17 hospitals which were rendered unusable, 94% are now in operation and 7 are undergoing major repairs. o An accelerated construction schedule for 9 hospitals is underway.

Pending: o The 9 hospitals with the accelerated construction schedule are expected to become operational during the first half of 2011. o Repair work at 7 other hospitals to be completed (second half of 2012). o Implement the plan to replace the permanent hospitals in the following places: Talca, Curicó, Cauquenes, Parral, Constitución, Chillán etc. Public Infrastructure

Progress made: o 99.1% of the public infrastructure has been partially or wholly restored:  100% of the 1,554 kilometers of damaged roads.  100% of the port infrastructure.  100% of rural drinking water systems.  100% of aerodromes and airports.  98.9% of hydraulic facilities (canals, reservoirs and rainwater collectors).  98.6% of the bridges that were damaged. Pending:

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Reconstruction Balance Sheet o Complete the portfolio of emergency projects (CH$164 billion, 80% already complete) and reconstruction works (CH$191 billion). Of the reconstruction projects, 15 have been completed, 9 contracts have been awarded, 14 are currently in the tender process and 47 are due to be put out for tender. Damage caused by the earthquake of February 27, 2010

Digua Canal Irrigation System, Maule Region (after the earthquake)

Digua Canal Irrigation System, Maule Region (November, 2010)

4. Legislative Agenda to deal with the Emergency and Reconstruction An intensive legislative agenda was carried out to deal with the emergency and reconstruction. Three types of instrument were used: Decrees to address the emergency, financing laws and laws to grant aid directly to the

people affected. Decrees

The following are some of the principal decrees which were passed: Decree to declare a Constitutional State of Disaster Emergency in the 6th Region (SD N°173, of March 11, 2010). th Decree to delegate presidential faculties in the 6 Region to the Head of National Defense (Exempt Decree N° 861, of March 11, 2010.) Decree to set up the Interministerial Reconstruction Committee to deal with the aftermath of the February 27 earthquake (SD N° 317, of March 11, 2010). Decree to set up the Emergency Committee (SD N° 350, of March 22, 2010). Decree to reassign the 2010 budgets (Decree N° 338) in order to finance emergency measures. Financing Laws

The following laws were passed to finance the reconstruction: Law N° 20,455, to finance the reconstruction. Law N° 20,469, to modify mining royalties. Law N° 20,444, which set up the Reconstruction Fund and established incentives for donations. Other legislation passed

Changes to the timeframes for declaring presumed death. Increased flexibility in the requirements for obtaining unemployment benefits.

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Reconstruction Balance Sheet Extension and improvements to the scheme to incentivize the provision of training to temporary employees. Changes to the fishing law and the establishment of temporary norms for rebuilding. Exceptions to the regulations concerning educational scholarships. The paperwork required to normalize property titles in the affected zones was made free of charge. Increase in the media fund for 2010. Extraordinary contribution to the Common Municipal Fund. Modernization of the Telecommunications Network. 5. Financing Plan

The total cost of the damage from the earthquake is estimated to be around US$30 billion, of which almost US$10 billion relates to public infrastructure. The financing plan designed by the Treasury Minister drew on the following sources of finance:

Financing Plan The benefits of the financing plan have been reflected in the significant recognition extended to the Treasury Minister from many different sources.

Recovery in economic growth (US$2.5 billion per year). Austerity measures and budgetary reallocations totaling US$730 million. Donations Law. Sale of non-vital assets. Issue of internal and external debt. Use of the Economic and Social Stabilization Fund (Fondo de Estabilización Económica y Social, FEES) and of the Copper Law Fund (Fondo de la Ley del Cobre). Tax increases: o First category tax on businesses (temporary increase). o Specific tax on mining (Royalty). o Property tax: Surcharge of 0.25% for 2 years on the 5% of homes of greatest fiscal value, which were unaffected by the earthquake. o Tax on tobacco. Improvements in the tax system (the DFL-2 category for property, Agreed Deposits, reduction in tax evasion etc.). Furthermore, in spite of the damage caused by the catastrophe, stamp tax was halved and reinvested profits by SMEs were made exempt from first category tax, measures which mainly benefitted entrepreneurs and individuals. Meanwhile, countries around the world expressed solidarity with Chile, providing technical and financial aid, equipment, field hospitals, food and other valuable contributions. Thus, during 2010, Chile received contributions from over 60 countries and many international organizations such as the UN, FAO, OAS, PAHO, the European Union and other institutions. This aid has been a great help – above all during the emergency phase – however, the monetary contributions received through the Chilean Embassies and Consulates overseas, totaling some US$22 million, represent just under 0.1% of the combined cost of the earthquake 1 and tsunami in the country . 6. Design and Implementation of the New Early Warning and Efficient Help System

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Information provided by the Foreign Affairs Ministry.

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Reconstruction Balance Sheet Great strides have been made to ensure that the next time Chile experiences a natural disaster, whatever its nature and wherever it occurs, we will be better equipped to deal with it. The following initiatives have therefore been put in place: Modernization of the telecommunications system (Law N°20,475). Regional Offices operational 24/7 (since June 2010). The transfer of regional offices to safe areas. “Atento Norte” Simulation Program to prepare people in northern Chile for an earthquake (over 260,000 people took part). Agreement with ham radio operators. National satellite network, at all the regional offices of Chile’s national emergency office (Oficina Nacional de Emergencia, ONEMI). Early Warning System Agreement signed with the Chilean Radio Broadcasters Association (Asociacion de Radiodifusores de Chile, ARCHI).

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Reconstruction Balance Sheet

C. Conclusions Despite the destruction caused by the earthquake, the Government has managed to implement the Reconstruction Plan effectively. This is reflected in the following achievements, just one year on from the tragedy: 99% of the public infrastructure has been partially or wholly restored; 60% of housing subsidies have been paid out; support has been provided for the reconstruction or repair of 70% of the educational establishments which were damaged; 100% of the hospital beds which were lost have been replaced either temporarily or permanently; and the accelerated construction of 9 hospitals is under way. Furthermore, one year on from the tragedy, the Government is also fulfilling the most important parts of its program. In fact, during 2010, some 428, 000 jobs were created, the economy grew by more than 5%, exports and investments both grew significantly, victimization and fear of crime fell, and the key reforms promised in the Government Program got underway, spearheaded by the Educational Reform, which was passed in January 2011.

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Executive summary Reconstruction balance one year after the 27F earthquake - English version